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Ed's Critical Reads

Apr 18, 2014

NYT: Rents No Longer "Affordable" for Most Americans

Demand for rental housing has soared over the past seven years, and that has pushed rents higher than many middle-class Americans can afford to pay.

A rule of thumb is that households shouldn't pay more than 30% of their income on rent and utilities.

But now half of U.S. renters devote more than 30% of their income to housing, up from 38% in 2000, revealed a report from Harvard University.

Housing Secretary Shaun Donovan has called this "the worst rental affordability crisis that this country has ever known."

The story from The New York Times showed up on the moneynews.com Internet site early Wednesday afternoon EDT---and today's first news item is courtesy of West Virginia reader Elliot Simon.

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IHS Economist: "Living Standards Will Suffer" as Food Prices Surge

Food prices are registering sharp gains, climbing 0.4% in both February and March and threatening to put a damper on the economy.

What's happening is that wholesalers have raised the prices they charge grocers, and grocers in turn have passed along the increases to their customers, USA Today reports. That obviously creates a hardship for consumers, who account for about 70% of GDP.

"Living standards will suffer, as a larger percentage of household budgets are spent on grocery store bills, leaving less for discretionary spending," Chris Christopher, an economist at IHS Global Insight, told USA Today.

The bad news may not be over. California's drought will probably push prices upward this year for fruits and vegetables, including avocados, lettuce and berries, Timothy Richards, a professor at Arizona State University's business school, told the paper.

This short article from USA Today on Thursday, was also picked up by the moneynews.com Internet site---and it's also courtesy of Elliot Simon.

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Hedge Funds Post Worst First-Quarter Results Since 2008

It’s time again for another installment of “Hedge Funds Are a Ripoff,” our long-running series chronicling the asset class’s habit of underperforming far less exotic investments while charging more and limiting clients’ access to their own money.

Hedge funds posted their worst first-quarter results since 2008, according to financial data service Preqin, whose “All Hedge Fund Strategies” index shows a gain of 1.2% since the start of the year. That compares with a 1.8% total return for the Standard & Poor’s 500-stock index through March 31. Hedge funds have badly trailed plain-vanilla equities over the past 12 months, gaining 8.53% vs. 19.32% for the S&P. In 2013, the gap between hedge funds and stocks was the widest since 2005.

Defenders of hedge funds often get exasperated when the asset class gets compared with stocks: The investments are not supposed to outperform equities when the market is on a tear, this argument goes—they operate complicated strategies that hedge against lots of contingencies, so that they do well in all types of weather. Well, nobody would call 2014 a bull market, and hedge funds aren’t exactly shining now, either.

This piece appeared on the businessweek.com Internet site on Wednesday---and I found it in yesterday's edition of the King Report.

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Matt Taibbi: The SuperRich in America Have Become "Untouchables" Who Don't Go to Prison

Earlier this month, attorney James Kidney, who was retiring from the Securities and Exchange Commission, gave a widely reported speech at his retirement party. He said that his bosses were too "tentative and fearful" to hold Wall Street accountable for the 2008 economic meltdown. Kidney, who joined the SEC in 1986, had tried and failed to bring charges against more executives in the agency’s 2010 case against Goldman Sachs. He said the SEC has become "an agency that polices the broken windows on the street level and rarely goes to the penthouse floors. ... Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening," he said.

Well, for more, we turn to our guest Matt Taibbi, award-winning journalist formerly with Rolling Stone magazine, now with First Look Media. His new book is called The Divide: American Injustice in the Age of the Wealth Gap.

Matt, we welcome you back to Democracy Now! It’s a remarkable, important, certainly needed book in this day and age. Talk about the thesis. What is the divide?

This interview/book review was posted on the alternet.org website on Tuesday---and for content and length reasons, had to wait for today's column.  It's the first offering of the day from Roy Stephens.  This will be on my must-read pile for the weekend.

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After Success on Iran, US Treasury's Sanctions Team Faces New Challenges

This is what the modern American war room looks like: the clocks on the wall show the times in Kabul, Tehran and Bogota. The faces around the conference table are mostly young. There is talk of targets, and of middle-of-the-night calls to Europe.

But the meeting one recent morning convened deep within the Treasury Department, not the Pentagon. The weapons at hand were not drones or cruise missiles, but financial sanctions, aimed with similar precision at U.S. rivals' economic interests.

Before discussing possible next steps against Russia over its annexation of Crimea, Adam Szubin, the slim, boyish-looking director of Treasury's Office of Foreign Assets Control, thanked his team for putting in a string of sleepless nights to devise sanctions against senior Russian officials and associates of President Vladimir Putin.

The measures, rolled out in three executive orders signed by President Barack Obama in March, included blocking the Russians and Bank Rossiya, Russia's 17th-largest bank, from access to the U.S. financial system and freezing their U.S. assets.

This longish Reuters story, filed from Washington, was posted on their website late Monday afternoon EDT---and it's another news item that had to wait for today's column.  It's definitely worth reading---and Ambrose Evans-Pritchard touches on it in the story from The Telegraph posted below this one.  I thank internationalman.com senior editor Nick Giambruno for bringing it to our attention.

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US Financial Showdown with Russia Is More Dangerous Than It Looks, for Both Sides

The United States has constructed a financial neutron bomb. For the past 12 years an elite cell at the US Treasury has been sharpening the tools of economic warfare, designing ways to bring almost any country to its knees without firing a shot

The strategy relies on hegemonic control over the global banking system, buttressed by a network of allies and the reluctant acquiescence of neutral states. Let us call this the Manhattan Project of the early 21st century.

"It is a new kind of war, like a creeping financial insurgency, intended to constrict our enemies' financial lifeblood, unprecedented in its reach and effectiveness," says Juan Zarate, the Treasury and White House official who helped spearhead policy after 9/11.

“The new geo-economic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive,” he writes in his book Treasury's War: the Unleashing of a New Era of Financial Warfare.

This absolute must read Ambrose Evans-Pritchard commentary showed up on the telegraph.co.uk Internet site very early Wednesday evening BST---and I found it in yesterday's edition of the King Report.

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Runaway Spy Snowden Is Surprise Guest on Putin Phone-In

Edward Snowden, the fugitive former U.S. spy agency contractor who leaked details of U.S. intelligence eavesdropping, made a surprise appearance on a TV phone-in hosted by Vladimir Putin on Thursday, asking the Russian president if his country also tapped the communications of millions.

The exchange was the first known direct contact between Putin and Snowden since Russia gave the American refuge last summer after he disclosed widespread monitoring of telephone and internet data by the United States and fled the country.

Snowden was not in the studio with Putin, who angered U.S. President Barack Obama by refusing to send the American home to face espionage charges. He submitted his question in a video clip that a lawyer said had been pre-recorded.

Snowden, 30, wearing a jacket and open-collar shirt and speaking before a dark background, asked Putin: "Does Russia intercept, store or analyze, in any way, the communications of millions of individuals?"

This must-read Reuters story, filed from Moscow, was posted on their Web site late on Thursday morning EDT---and it's the second contribution to today's column from Roy Stephens.

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Putin Says it's Impossible for Europe to Stop Buying Russian Gas

Russian President Vladimir Putin said on Thursday it would not be possible for Europe, which is trying to cut its reliance on Russian energy, to completely stop buying Russian gas.

Putin also said that the transit via Ukraine is the most dangerous element in Europe's gas supply system, and that he was hopeful a deal could be reached with Ukraine on gas supplies.

Russia meets around 30% of Europe's natural gas needs. Moscow's actions in Ukraine have spurred attempts by the continent to reduce its dependency on oil and gas supplies from the former Cold War foe.

"Of course, everyone is taking care about supply diversification. There, in Europe, they talk about increasing independence from the Russian supplier," said Putin.

This is another moneynews.com story that's courtesy of Elliot Simon.  It was posted on their Internet site later in the morning EDT.

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Opinion: Putin's Q&A Session Was Brilliant, Sincere, Warm, and Compassionate

The President of the Russian Federation Vladimir Putin conducted his yearly question-and-answer session with the public and citizens of Russia, this time spending approximately three hours and fifty minutes answering a wide range of questions in an impressive manner never once faltering or at a loss and citing facts, figures and details on everything from assisting a disabled man to obtain a home to the aggressive expansion of NATO to the East. This year the Kremlin added a the possibility of sending in video for those who wanted to ask the president questions, as well as text messages, e-mails, regular post, phone calls and submissions through the Internet.

This very interesting commentary, which is worth reading, showed up on the voiceofrussia.com Internet site early on Thursday evening Moscow time---and it's the final offering of the day from Roy Stephens, for which I thank him.

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Saudi Spy Chief Ousted Under US Pressure: Experts

The exit of Saudi's spy chief was the result of US pressure over his stance on Syria but does not signal a shift in Riyadh's goal of toppling the Damascus regime, experts say.

Riyadh, as is usual, did not elaborate on its statement this week that Prince Bandar bin Sultan was being replaced, saying only that the veteran diplomat had asked to step down.

But a Saudi expert said that Washington -- irritated for some time by Prince Bandar's handling of the Syria dossier -- had in December demanded his removal.

This news item showed up on the france24.com Internet site later in the afternoon Europe time---and it's certainly a must read for all students of the New Great Game.

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Death from Above: How American Drone Strikes Are Devastating Yemen

The people of Yemen can hear destruction before it arrives. In cities, towns and villages across this country, which hangs off the southern end of the Arabian Peninsula, the air buzzes with the sound of American drones flying overhead. The sound is a constant and terrible reminder: a robot plane, acting on secret intelligence, may calculate that the man across from you at the coffee shop, or the acquaintance with whom you've shared a passing word on the street, is an Al Qaeda operative. This intelligence may be accurate or it may not, but it doesn't matter. If you are in the wrong place at the wrong time, the chaotic buzzing above sharpens into the death-herald of an incoming missile.

Such quite literal existential uncertainty is coming at a deep psychological cost for the Yemeni people. For Americans, this military campaign is an abstraction. The drone strikes don't require U.S. troops on the ground, and thus are easy to keep out of sight and out of mind. Over half of Yemen's 24.8 million citizens – militants and civilians alike – are impacted every day. A war is happening, and one of the unforeseen casualties is the Yemeni mind.

Symptoms of post-traumatic stress disorder, trauma and anxiety are becoming rampant in the different corners of the country where drones are active. "Drones hover over an area for hours, sometimes days and weeks," said Rooj Alwazir, a Yemeni-American anti-drone activist and co-founder of Support Yemen, a media collective raising awareness about issues afflicting the country. Yemenis widely describe suffering from constant sleeplessness, anxiety, short-tempers, an inability to concentrate and, unsurprisingly, paranoia.

Ah, yes!  America bringing "democracy" to all countries of the world.  This two-page essay showed up on the Rolling Stone Web site on Monday---and is another news item that had to wait for today's column.  It's also another offering from Roy Stephens.

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America's Coup Machine: Destroying Democracy Since 1953

Soon after the 2004 U.S. coup to depose President Jean-Bertrand Aristide of Haiti, I heard Aristide's lawyer Ira Kurzban speaking in Miami.  He began his talk with a riddle: "Why has there never been a coup in Washington D.C.?"  The answer: "Because there is no U.S. Embassy in Washington D.C."  This introduction was greeted with wild applause by a mostly Haitian-American audience who understood it only too well.

Ukraine's former security chief, Aleksandr Yakimenko, has reported that the coup-plotters who overthrew the elected government in Ukraine "basically lived in the (U.S.) Embassy.  They were there every day."  We also know from a leaked Russian intercept that they were in close contact with Ambassador Pyatt and the senior U.S. official in charge of the coup, former Dick Cheney aide Victoria Nuland, officially the U.S. Assistant Secretary of State for European and Eurasian Affairs.  And we can assume that many of their days in the Embassy were spent in strategy and training sessions with their individual CIA case officers.

To place the coup in Ukraine in historical context, this is at least the 80th time the United States has organized a coup or a failed coup in a foreign country since 1953.  That was when President Eisenhower discovered in Iran that the CIA could overthrow elected governments who refused to sacrifice the future of their people to Western commercial and geopolitical interests.  Most U.S. coups have led to severe repression, disappearances, extrajudicial executions, torture, corruption, extreme poverty and inequality, and prolonged setbacks for the democratic aspirations of people in the countries affected.  The plutocratic and ultra-conservative nature of the forces the U.S. has brought to power in Ukraine make it unlikely to be an exception.

If I had to pick just one story for you to ready today---this would be it.  And if you want to hear about these sorts of things from the inside, John Perkins, author of Confessions of an Economic Hit Man, was an operative for the U.S. in some of these situations.  This longish essay showed up on the alternet.org Web site on April 8---and it's another contribution from Roy Stephens, for which I thank him.

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Japan Population Drops for Third Year Straight; 25% Are Elderly

Japan’s population has shrunk for the third year running, with the elderly making up a quarter of the total for the first time, government data showed Tuesday.

The number of people in the world’s third-largest economy dropped by 0.17% or 217,000 people, to 127,298,000 as of last Oct. 1, the data said. This figure includes long-staying foreigners.

The number of people aged 65 or over rose by 1.1 million to 31.9 million, accounting for 25.1% of the population, it said.

With its low birthrate and long life expectancy, Japan is rapidly graying and already has one of the world’s highest proportions of elderly people.

This very interesting story is definitely worth reading.  It was posted on the japantimes.co.up Internet site on Tuesday sometime---and it's another story I found in yesterday's edition of the King Report.

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Japan Bond Market Liquidity Dries Up as BoJ Holding Crosses ¥200 Trillion

The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.

Data from the BoJ late on Monday showed its holding of Japanese government bonds topped ¥200tn ($1.96tn), or about 20% of outstanding issuance – up by more than half from ¥125tn about a year ago.

The fall in market liquidity looks set to intensify as the BoJ has vowed to continue its aggressive buying for at least another year, with market players expecting it to expand its easing some time later this year.

“Everybody thinks the market is not going to move for the time being because of the purchase by our dear customer, the BoJ,” said a trader at a major Japanese brokerage.

This Reuters story from Tuesday found a home over at the gulf-times.com Internet site---and I thank reader 'David in California' for sending it around yesterday.

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Five King World News Blogs

1. David P: "One of the Greatest Opportunities In More Than a Decade"  2. Art Cashin: "Unprecedented $5 Trillion Liquidity Monster to Be Unleashed"  3. Keith Barron: "The Elites Fear What Will Crash the Global Financial System"  4. Richard Russell: "Silver---and the Greatest Mistake My Father Made"  5. "Pippa" Malmgren: "Western Default, China---and Gold"

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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Paper Gold Falls in West, but Premium for Real Metal Jumps in India

Hawala Premium Crosses 4% as Akshay Tritiya Boosts Demand; Spot Delivery Premium also Doubles

The premium for getting spot delivery for gold in the Indian market jumped to $70 an ounce from $35 a couple of days earlier, with a sudden scarcity.

While the trade is facing a scarcity of gold in official channels due to lower imports by private banks, the increase in demand in the unofficial market resulted in the hawala market premium crossing four per cent from 2.75-3% a few days earlier and 2-2.25% a month before, said a source in the Kolkata market, where smuggled gold inflow is said to be higher.

Recently, gold spot premiums were on a downward trajectory due to permission to five private banks to import gold. However as the new financial year had begun, a private bank bullion desk official said quarterly and yearly targets were being fixed, which is why their import was limited.

This gold-related news item, filed from Mumbai, showed up on the Business Standard Web site late on Wednesday evening IST---and I found it embedded in a GATA release.

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Asia Takes Every Ounce West Unloads, but Gold Will Fall for Two Years, GFMS Says

A lack of investment interest in gold is starting to take its toll on the price, with an average of $1,225/oz forecast for 2014 and heading lower in 2015, GFMS said Thursday in its Gold Survey 2014.

The price forecast is 13% lower than the 2013 average of $1,411.23/oz.

"The price is expected to post 2014 lows in mid-year, with a fundamentally driven rally thereafter, but this is likely to peter out in early 2015," the Thomson Reuters/GFMS survey read.

Despite the "heavy visible sales from Exchange Traded Funds, driving a 25% price fall in the second quarter [of 2013], OTC investors were net buyers in 2013, notably in East Asia and the Middle East," the report read.

This story showed up on the platts.com Internet site midmorning in London yesterday---and it's another gold-related news item I found in a GATA release.  By the way, I'd take anything that GMFS says with a big grains of salt.  But it's worth reading nonetheless.

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Platinum Shortfall to Take Four Years to Fix - Morgan Stanley

A labor dispute that all but shut platinum mines in South Africa since January is extending the longest shortfall in global production since 2005, which Morgan Stanley predicts will take at least four years to fix.

For a third straight year, makers of auto parts and jewelry will use more of the metal than is mined. Credit Suisse Group AG on March 31 raised its deficit forecast for this year by 25% to 836,000 ounces, after concluding the strike in South Africa, the world’s top producer, will prevent more than 1 million ounces from being retrieved in 2014.

Workers who normally earn 5,000 rand ($474) a month have gotten nothing since the walkout began, forcing some to sell belongings as union leaders renew demands for higher pay. Mine owners including Lonmin Plc say they are losing $15 million a day and may buy metal to meet supply commitments. Hedge funds more than doubled their bets on higher prices this year, and holdings in exchange-traded funds backed by platinum are up 68% from a year ago.

This longish Bloomberg story, co-filed from Johannesburg and New York, was picked up by the mineweb.com Internet site yesterday---and represents the final offering of the day from Elliot Simon.  It's certainly worth reading.

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Platinum Producers Capitulate on Union Pay Demand

Saying they could "ill afford" it, Anglo American Platinum and Impala Platinum made a startling offer to the Association of Mineworkers and Construction Union (AMCU) on Thursday in a bid to end a 13-week long strike that has shut down much of South Africa's platinum sector.

Both Anglo American and Impala issued press releases stating they would agree to pay entry-level underground workers a minimum of R12,500 a month in pay by July 2017.

The offer appears to substantially meet the AMCU's strike demand on pay that Anglo American, Impala and Lonmin had long maintained was impossible.

I linked this story further up when I was discussing the strange timing of the selloffs in both platinum and palladium in New York trading yesterday, but here it is again if you missed it.  It was filed from Johannesburg---and posted on the mineweb.com Internet site yesterday sometime---and it's worth reading as well.

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Apr 17, 2014

Path to Extinction: Only Three US Companies Still Have AAA Credit Ratings

Their numbers have been dwindling for years, and now only three U.S. companies have the coveted AAA credit rating from Standard & Poor's.

Automatic Data Processing was the latest U.S. blue chip to lose its pristine AAA rating from S&P, downgraded this week after it spun off its auto-dealers services unit, USAToday noted.

That leaves only Johnson & Johnson, Exxon-Mobil, and Microsoft as companies rated AAA, which is reserved for companies with the unassailable financial strength and discipline.

In 1980, there were more than 60 U.S. companies with AAA ratings. That number declined to six in 2008. Since then, General Electric, Pfizer, and now ADP have fallen out of that esteemed ranking.

Today's first news item was posted on the moneynews.com Internet site early yesterday morning EDT---and it's courtesy of West Virginia reader Elliot Simon.

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Yellen: Fed Stimulus Still Needed for Job Market

Federal Reserve Chair Janet Yellen said Wednesday that the U.S. job market still needs help from the Fed and that the central bank must remain intent on adjusting its policy to respond to unforeseen challenges.

In her first major speech on Fed policy, Yellen sought to explain the Fed's shifting guidance on its interest-rate policy, which at times has confused or jarred investors. She said the Fed's policies "must respond to significant unexpected twist and turns the economy may make."

"Thus far in the recovery and to this day, there is little question that the economy has remained far from maximum employment," Yellen told an audience at the Economic Club of New York.

She said the Fed's forecast for moderate growth has changed little since last fall despite the severe winter. Fed officials still see only a gradual return to full employment over the next two to three years, Yellen said.

This AP news item was picked up ABC News yesterday---and it's the second offering in a row from Elliot Simon.

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Spain ETF Grows as Rajoy Attracts Record US Investments

The iShares MSCI Spain Capped ETF attracted almost $238 million in the period ended April 11, the most for any country, according to data compiled by Bloomberg going back to 2002. Traders have poured money into the exchange-traded fund every week in 2014. The $1.9-billion ETF tracking companies from Banco Santander (SAN) SA to Telefonica SA has gained 5.3% this year, compared with declines in the Standard & Poor’s 500 Index and the Stoxx Europe 600 Index.

Confidence is growing that Prime Minister Mariano Rajoy will make good on his pledge to complete an overhaul of Spain’s economy as the nation that sought a bank bailout in 2012 returns to growth. A manufacturing report this month pointed to the fastest expansion since at least April 2011, and lenders from Santander to Banco Popular Espanol SA (POP) are benefiting from European Central Bank President Mario Draghi’s policy to keep interest rates at a record low.

This longish Bloomberg article, filed from London, was posted on their Internet site late yesterday morning MDT---and that makes it three in a row from Elliot Simon.

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Regional Unemployment Highest in Spain

Over two dozen regions throughout the Union have an unemployment rate twice the EU average.

The data, published on Wednesday (16 April), by the EU’s statistical office Eurostat, says the jobless rate in 27 regions in 2013 was higher than 21.6%.

Thirteen are found in Spain, 10 in Greece, three in the French Overseas Departments, and one in Italy.

Five of the worst affected are found in Spain alone.

This story, filed from Brussels, showed up on the euobserver.com Internet site yesterday morning---and it's the first offering of the day from Roy Stephens.

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Eurozone Inflation Stuck in "Danger Zone," Keeps Pressure on the ECB

A shock drop in March eurozone inflation to its lowest level since November 2009 was confirmed on Wednesday, keeping pressure on the European Central Bank to intervene should prices not rebound.

The year-on-year inflation rate in the 18 countries sharing the euro was 0.5% in March against 0.7% in February, the European Union's statistics office Eurostat said.

Inflation has now been in the ECB's "danger zone" of below 1% for six consecutive months, fuelling speculation that the ECB will need to take further action.

ECB policy makers said the bank stood ready to deploy unconventional measures to ensure that inflation did not stay low for too long.

This short, but must-read commentary, was posted on the moneynews.com Internet site early yesterday morning EDT---and it's the fourth and final offering of the day from Elliot Simon.

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Out of Ammo? The Eroding Power of Central Banks

Since the financial crisis, central banks have slashed interest rates, purchased vast quantities of sovereign bonds, and bailed out banks. Now, though, their influence appears to be on the wane with measures producing paltry results. Do they still have control?

Once every six weeks, the most powerful players in the global economy meet on the 18th floor of an ugly office building near the train station in the Swiss city of Basel. The group includes United States Federal Reserve Chair Janet Yellen and her counterpart at the European Central Bank (ECB), Mario Draghi, along with 16 other top monetary policy officials from Beijing, Frankfurt, Paris, and elsewhere.

The attendees spend almost two hours exchanging views in a debate chaired by Bank of Mexico Governor Agustín Carstens---and the central bankers talk about the economy, growth and market prices.

But ever since many central banks lowered their interest rates to almost zero, bought up sovereign debt and rescued banks, a new, critical undertone has crept into the dinner conversations. Monetary experts from emerging economies complain that the measures taken by Europeans and Americans are pushing unwanted speculative money their way. Western central bankers say they have come under growing political pressure. And recently, when the host of the meetings -- head of the Basel-based Bank for International Settlements Jaime Caruana -- speaks in one of his rare public appearances, he talks about "chronic post-crisis weakness" and "risk." Monetary institutions, says Caruana, are at "serious risk of exhausting the policy room for manoeuver over time."

This longish five-page essay showed up on the spiegel.de Internet site early yesterday afternoon Europe time---and it's the second offering of the day from Roy Stephens. It's definitely worth reading.

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EU Countries to Boost Defence Budgets in Light of Ukraine

Military chiefs have said the Ukraine crisis is a “wake-up call” for E.U. countries’ defence spending, as the US backed Ukraine’s use of force in eastern regions.

Speaking to press after a regular meeting of E.U. defence ministers in Luxembourg on Tuesday (15 April), the deputy chief of the EU’s external action service, Maciej Popowski, said: “We’ve had 70 years of peace now [in Europe], but we see that power politics is back with a vengeance, so it’s a wake-up call and now we need to get serious about defence.”

He noted that “this was the feeling around the table” at the Luxembourg event.

He added that E.U. foreign relations chief Catherine Ashton told the ministers: “If Ukraine is not a trigger to get serious about spending, about pooling and sharing, about smart defence, then what more do we need to get real?”

Blah, blah, blah.  I'll be amazed if this amounts to anything more than talk.  This "news" item was posted on the euobserver.com Internet site yesterday morning Europe time---and I thank Roy Stephens once again for sending it our way.

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Three King World News Blogs

1. Grant Williams: "Remarkable Road Map From $5,000 to $20,000 Gold"  2. Eric Sprott: "Crisis, Gold---and an Incredible Opportunity No One is Looking At"  3. David P: "One of the Greatest Opportunities in More Than a Decade"

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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Scientists Verify World's Largest Single Crystal Piece of Gold

Scientists at Los Alamos National Laboratory in the U.S. have confirmed a 7.68 oz (217.78 g) piece of gold is in fact a single crystal, increasing its value from around US$10,000 to an estimated $1.5 million. The specimen, the largest single crystal piece of gold in the world, was discovered in Venezuela decades ago, but it is only by using advanced probing instruments that experts can now verify its authenticity.

Gold found in the ground will generally have a polycrystalline structure, meaning it is made up of many crystallites, varying in shape and size. Gold of a mono-crystalline structure, where the material is unbroken, are rarer and of significantly higher value. The US-based owner provided geologist John Rakovon with four gold specimens, hoping to determine whether they were of a polycrystalline or mono-crystalline structure.

This very interesting news item, complete with an embedded video, showed up on the gizmag.com Internet yesterday---and my thanks go out to Saskatoon, Saskatchewan reader Marvin Weiler for bringing it to my attention---and now to yours.  If you don't read the article, you should at least look at the picture.

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How Marriage Is Keeping Gold’s Prospects Bright in China

Last year was a big one for gold in China. As Chinese middle-class families, particularly aunties, bought up gold bars and jewelry for their use as accessories as well as investments, China became both the number-one producer and consumer of the precious metal—surpassing even India where yearly bullion demand had long been the world’s highest.

This year, with prices up of gold up, a government campaign against conspicuous spending by officials, and financial reforms designed to increase the availability of other investment opportunities, a new report from the World Gold Council predicts that demand for the metal won’t be as strong as last year.

But there’s one segment of the market that has and should continue to underpin China’s appetite for gold—newlyweds and the people who want to wish them well.

This short, but rather interesting gold-related article showed up on the qz.com Internet site on Tuesday---I found it posted over at the Sharps Pixley website---and here's another article on the same subject from the mining.com Internet site.

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Gold Import Curbs Seen Continuing in India to Help Currency

India, the world’s second-largest gold consumer, will probably keep restrictions on imports to control the current account deficit and defend the rupee, said the managing director of the country’s biggest refiner.

The limits would result in shipments of 650 metric tons to 700 tons in the 12 months started April 1 from 650 tons a year earlier, according to Rajesh Khosla at MMTC-PAMP India Pvt. Purchases were 845 tons in 2012-2013, the finance ministry says. While the form of restrictions may change, the government will continue to restrain buying, he said in an interview.

India represented about 25% of global demand in 2013, the World Gold Council says. Prime Minister Manmohan Singh requires importers to supply 20% of purchases to jewelers for export and sell 80% on the local market. Singh also raised import taxes and only allows banks and government-nominated entities to ship in gold. The new finance minister may review the rules after elections in progress now.

This news item, filed from New Delhi, was posted on the Bloomberg website just before midnight last night Denver time---and it's another story that I "borrowed" from the Sharps Pixley Web site.

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India’s Gold Demand Surges as Supply Declines

Amidst high import duties, the gold demand in India likely to stay high in this year. Last year, India consumed 975 tons and it expects to be between 900 and 1,000 metric tons in 2014.

According to the World Council, last year China overtook India as the biggest consumer of gold in the world and both countries seem to want more gold for further days.

As per the report, India’s current account deficit was narrowed by the stringent import restrictions over the last year whereas the gold smuggling increased, approximately 200 tons of gold. The customs department seized less than 1% of smuggled gold in the last year.

This very short gold-related news item, filed from Mumbai, showed up on the metal.com Internet site in the wee hours of the morning British Summer Time [BST].  It's another story I found over at the sharpspixley.com Internet site just after midnight Denver time [BST-7].

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India's Pain Is UAE's Gain - Indian Expats Buy Up Gold Jewellery

If any nation is happy about India's gold import curbs it is the UAE, where bullion traders are registering brisk sales given the restrictions on the import of the precious metal in India.

The curbs on gold in India have raised demand for gold and diamond-studded gold jewellery among expatriate Indians and visitors from India to the UAE.

"The UAE’s gold trade has become the de facto beneficiary of the Indian government’s tough stance on domestic consumption. There is almost a 16% difference on a per gram basis, in buying gold ornaments in the UAE as compared to buying gold in India," said an official at a store in Dubai's gold souk.

This interesting, but not surprising story, was posted on the mineweb.com Internet site yesterday---and it's worth reading.

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Lawrence Williams: Jansen Sticks By China Gold Demand Figures

There has been a considerable amount of disagreement over China’s real gold demand figures – with some of the differences being accounted for by what is actually being included in the varying estimates, with different analysts coming up with figures between around 1,100 tonnes from organisations like GFMS to over 4,000 tonnes from Alasdair Macleod of Gold Money. While the 1,100 tonne estimates seem on the face of things to be unaccountably low given some of the published statistics on known Chinese imports, the Macleod figures seem unaccountably high.

Somewhere in the middle comes the detailed analyses from China gold watcher Koos Jansen as published on his In Gold we Trust website, and he has now put out a detailed response confirming his own figures and commenting that Macleod’s high figures include unintentional double counting – and given that Chinese sources for this information can be confusing and contradictory, this is not too surprising!

This commentary by Lawrie is definitely worth reading---and it was posted on the mineweb.com Internet site sometime yesterday.

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Apr 16, 2014

Debt Burdens Soar for Major US Companies

Large U.S. companies have more than tripled their debt loads in the past three years, enabling them to spend money without dipping into their record-high cash reserves.

The spending has included share buybacks, dividends and capital investments. Stock buybacks and dividends registered $214.4 billion in the fourth quarter, according to The Wall Street Journal.

The companies are reluctant to spend cash partly because much of it is held offshore and would be subject to taxes if repatriated, the Financial Times reports.

From 2010 to 2013, the 1,100 companies rated by Standard & Poor's for five years or longer saw their combined cash reserves climb $204 billion to $1.23 trillion, according to the FT. That pales in comparison to the $748 billion jump in gross debt to $4 trillion during that period.

This short, but must read news item, was posted on the moneynews.com Internet site early yesterday morning EDT---and today's first story is courtesy of West Virginia reader Elliot Simon.

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France Is the New Cauldron of Eurosceptic Revolution

Britain is marginal to the great debate on Europe. France is the linchpin, fast becoming a cauldron of Eurosceptic/Poujadist views on the Right, anti-EMU reflationary Keynesian views on the Left, mixed with soul-searching over the wisdom of monetary union across the French establishment.

Marine Le Pen’s Front National leads the latest IFOP poll for the European elections next month at 24%. Her platform calls for immediate steps to ditch the euro and restore the franc (“franc des Anglais” in origin, rid of the English oppressors), and to hold a referendum on withdrawal from the EU.

The Gaullistes are at 22.5%. The great centre-Right party of post-War French politics is failing dismally to capitalise on the collapse in support for President François Hollande.

The Parti Socialiste is trailing at 20.5%. The Leftist Front de Gauche is at 8.5% and they are not exactly friends of Brussels.

This Ambrose Evans-Pritchard blog was posted on the telegraph.co.uk Internet site yesterday sometime---and it's the first story of the day from Roy Stephens.

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Russian Holdings of Treasuries Fall to Lowest Since 2011

Russian holdings declined for a fourth straight month, to $126.2 billion, from $131.8 billion in January, according to figures released today in Washington as a part of a monthly report on foreign holders of Treasuries as well as international portfolio flows.

Russia might have been selling Treasuries, world’s most liquid assets, as part of an effort to limit a decline in the ruble, which lost 2% versus the dollar in February, the biggest drop that month among 24 emerging-market peers tracked by Bloomberg. The currency weakened amid rising tensions in Ukraine’s Crimean peninsula.

“Russia’s been slowly shedding holdings,” said Gennadiy Goldberg, a U.S. strategist at TD Securities USA LLC in New York. “When you try to defend your currency, this is when you really use those Treasury reserves.”

Russia might have also switched custodian from the Federal Reserve to an offshore center, based perhaps in the U.K., said Sebastien Galy, a senior currency strategist at Société Générale SA in New York. If that were the case, the securities would show up in the Treasury’s survey as British holdings.

This Bloomberg news item, filed from Washington, appeared on their Internet site late yesterday morning Denver time---and my thanks go out to Washington state reader S.A. for sending it along.

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Russia's Bond Market Is Achilles Heel as Showdown with West Escalates

Russia is at increasing risk of a full-blown financial crisis as the West tightens sanctions and Russian meddling in Ukraine pushes the region towards conflagration.

The country’s private companies have been shut out of global capital markets almost entirely since the crisis erupted, causing a serious credit crunch and raising concerns that firms may not be able to refinace debt without Russian state support.

“No Eurobonds have been rolled over for six weeks. This cannot continue for long and is becoming a massive issue,” said an official from a major Russian bank. “Companies have to roll over $10bn a month and nothing is moving. The markets have been remarkably relaxed about this, given how dangerous it is. Russia’s greatest vulnerability is the bond market,” he said.

This is another offering from Ambrose Evans-Pritchard.  This one was posted on The Telegraph's Web site late on Monday evening BST---and it's the second contribution of the day from Roy Stephens.  It's worth skimming.

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BRICS Countries to Set Up Their Own IMF

Very soon, the IMF will cease to be the world's only organization capable of rendering international financial assistance. The BRICS countries are setting up alternative institutions, including a currency reserve pool and a development bank.

The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.

Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.

In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. "Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank.

This story was posted on the Russia Beyond the Headlines Web site on Monday---and it's courtesy of Elliot Simon.

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Chinese Economic Growth Continues to Slow

China's Q1 GDP beat expectations rising 7.4% year-over-year.

Economists polled by Bloomberg were looking for Q1 GDP to rise 7.3%. But this was down from 7.7% the previous quarter, showing that China's economy continues to slow. 

Quarter-over-quarter however GDP was up 1.4% or 5.7% annualized. This was also slower than revised 1.7% growth in Q4 2013 and 7% annualized.

Meanwhile, year-to-date Chinese retail sales were up 12%, beating expectations for an 11.9% rise. For March, retail sales were up 12.2%.

I would expect that China's GDP numbers are massaged to perfection, just as much as the numbers coming out of the United States these days.  This business news item was posted on the Bloomberg Web site late yesterday evening MDT---and it's another contribution from Roy Stephens.

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Japan Risks Public Souring on Abenomics as Prices Surge

Prime Minister Shinzo Abe’s bid to vault Japan out of 15 years of deflation risks losing public support by spurring too much inflation too quickly as companies add extra price increases to this month’s sales-tax bump.

Businesses from Suntory Beverage and Food Ltd. to beef bowl chain Yoshinoya Holdings Co. have raised costs more than the 3 percentage point levy increase. This month’s inflation rate could be 3.5%, the fastest since 1982, according to Yoshiki Shinke, the most accurate forecaster of Japan’s economy for two years running in data compiled by Bloomberg.

The challenge for Abe and the Bank of Japan is to keep the public focused on the long-term benefits of exiting deflation when wages are yet to pick up and, according to BOJ board member Sayuri Shirai, most people still see price gains as “unfavorable.” Any jump in inflation that’s perceived as excessive by a population more used to prices falling could worsen consumer confidence and make it harder to boost growth.

A policy of "Inflate or die" is fraught with danger, as the Japanese government is discovering to its dismay.  This Bloomberg piece, filed from Tokyo, was posted on their Internet site in the wee hours of Monday morning Denver time.  I "borrowed" this story from yesterday's edition of the King Report---and it's worth reading.

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Kyle Bass: Why Japanese Bonds Look "Terrible"

Hayman Capital's Kyle Bass believes Wall Street's recent declines in the biotech and social media sector, which spread to global stock markets last week, shows cracks in the Japanese economy.

The Japanese Nikkei saw a huge drop last Friday, but the country's benchmark 10-year government bonds did not see yields change as investors fled stocks. Bass, one of the biggest critics of the Japanese economy, has made a big bet on Japan's economy devolving into a debt crisis.

During an interview on CNBC's "Squawk on the Street" on Tuesday, the hedge fund manager said questions remain whether Japan will lose control of interest rates or whether the yen can serve as an "escape valve." Bass sees inflation quickly surpassing Japaneses bond yields, he said.

Kyle only gets 1:03 minutes in this very brief appearance on CNBC yesterday---but it's a must watch.  I borrowed this from Tres Knippa's daily newsletter yesterday.

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Four King World News Blogs

1. Art Cashin: "The Reason Gold, Silver and Commodities Are Getting Smashed"  2. Dr. Stephen Leeb: "Gold and Silver Smashed as incredible Events Unfold in Europe"  3. Dr. Paul Craig Roberts: "U.S. Now Close to Total Collapse"  4. Gerald Celente: "The Vampire Squid, Gold and the Global Ponzi Scheme"

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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Zero Hedge: Gold Futures Halted Again on Latest Furious Slam Down

It seems the two words "fiduciary duty" are strangely missing from the dictionary of the new normal's asset management community. This morning, shortly before 8:27 a.m. ET, someone decided that it was the perfect time to dump thousands of gold futures contracts worth over half a billion dollars notional. This smashed gold futures down over $12 instantaneously, breaking below the 200-day moving averaged and triggering the futures exchange to halt trading in the precious metal for 10 seconds.

Ah, yes---there are those words "fiduciary duty" once again---the other thing, along with their testicles, that precious metal mining executives leave hanging on a nail in the hall closet before they head to the office.  This tiny Zero Hedge piece was posted on their Web site an hour after the Comex event itself---and the charts are worth a look.  I found this worthwhile news item in a GATA release yesterday.

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Dave Kranzler Reports on the Latest Manipulation of the Gold Price

Shortly after the Shanghai gold market closed last night, the market manipulators went to work on the gold price.  Gold was taken down another $20 during the morning trading in London, primarily in three HFT trading induced “mini flash crashes.” There were not any related news reports or events that would have triggered the relentless selling of paper gold (Comex futures via the Globex system and LBMA forward
contracts).

As soon as the Comex floor trading opened at 8:20 a.m. EST, nearly 4,000 contracts were dropped instantaneously onto the floor and into the Globex system.  This is over a half a billion dollars worth of gold – over 10 tonnes of paper gold – in a nanosecond.    This amount represents 47% of the amount of actual physical gold that was reported to be available for delivery by the Comex yesterday.  The sudden burst in volume halted the Comex computer system for 10 seconds.  The contract bomb caused an immediate $16 plunge in the price of gold.   Over a period of seven minutes from the time the Comex opened, over 14,000 contracts traded.  This represented over 18% of the total volume in Comex contracts that had traded in the previous 14 hours of trading starting at 6 p.m. EST the night before.

Obviously this is was intentional and determined selling  of paper gold for the purposes of driving the price a lot lower.  The news reported over the last 24 hours, if anything, should have caused the price of gold to move higher. This includes the re-escalation of the events in Ukraine, an inflation report released this morning which showed that the rate of inflation in March was double the rate that was expected by Wall Street forecasters and a report of manufacturing activity in the northeast which was significantly  lower than expected.

This short must read commentary showed up on the paulcraigroberts.org Internet site yesterday---and I thank Brad Robertson for sending our way.

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China Gold Demand Rising 25% by 2017 as Buyers Get Wealthier

Gold demand in China, which overtook India as the largest user last year, will rise about 25% in the next four years as an increasing population gets wealthier, according to the World Gold Council.

Consumer demand will expand to at least 1,350 metric tonnes by 2017, the London-based council said in a report today. Growth may be limited this year after 2013’s price decline spurred consumers to do more buying last year, it said. China accounted for about 28% of global usage last year, the council estimated in February.

Buying accelerated last year as prices slumped 28%, the most since 1981, and the nation became the top buyer in place of India, where import restrictions curbed demand. China’s economy will expand 7.4% this year, economists surveyed by Bloomberg estimate. While that’s set to be the least since 1990, it’s still more than double expected growth in the U.S.

This Bloomberg story showed up on their Web site during the Denver lunch hour yesterday MDT---and it's another gold-related story that I found over at the gata.org Internet site yesterday.  The World Gold Council's report on which this story is based is linked here.

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Much More to Come in China’s Already "Breathtaking" Gold Story

The scale, scope and speed of the development of the gold market in China to date has been “quite breathtaking” – and there is still a lot more to come, World Gold Council (WGC) investor relations manager John Mulligan indicated on Tuesday.

Speaking to Mining Weekly Online from London, Mulligan revealed that the WGC was engaged in ongoing discussions to support initiatives to make gold even more accessible in China and that various Chinese gold organisations were simultaneously setting out to modernise the entire gold supply chain from mining through to fabrication and appropriate technologies.

In its latest report, titled "China's gold market: progress and prospects," the WGC explains why the Chinese gold market will continue to expand, irrespective of short-term blips in the economy, and calculates that China’s middle class will grow by another 200 million people in the next six years, taking the total in the middle-income bracket to 500 million.

This is the same story as the prior Bloomberg piece, but with a slightly different spin.  This version, filed from Johannesburg, was posted on the miningweekly.com Internet site yesterday.  I thank reader Richard Murphy for finding it for us.

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Wall Street Journal Spins a Gold-Bullish Report to Bearish

China's appetite for gold is waning after a decade-long buying spree, suppressed by the country's economic slowdown and constrained credit markets.

Demand in the world's biggest gold consumer is likely to stay flat in 2014, according to estimates from the World Gold Council. Gold demand in China has expanded every year since 2002, when it declined, according to the industry group, whose forecasts are closely watched in the gold market.

Decelerating Chinese gold demand could threaten the recent recovery in gold prices, some investors and analysts say.

It's hard to believe that the WSJ could spin a sow's ear out of a silk purse, but when something has to be spun with a negative slants, there's always someone up to the task---especially when their jobs may be on the line if they don't.  A lot of gold and silver columnists and so-called experts fall neatly into this category as well.

The above three paragraphs are all there is to this WSJ story---at least that's all there is posted in the clear; and you need a subscription to read the rest.  This is another news item I found on the gata.org Internet site yesterday.

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Lawrence Williams: Chinese Take-Away – WGC Study Leaves Many Questions Unanswered

Further, although this report deals specifically with Chinese demand, the general urbanisation and earnings growth prevalent among the whole Asian gold-oriented populace – which hugely exceeds that of China alone – will also have a similar impact. Gold demand will be increasing hugely so where is the supply going to come from? And supply shortfalls will ultimately result in price increases – perhaps very substantial ones, but maybe not quite yet.

As gold bulls will be only too aware, such factors may take a long time to come to fruition and gold investment has to be seen as for the long term. It cannot be relied upon for short-term gains. That is very much the way the Asian market views it and ultimately – unless there is a total sea change in the way this sector views it – gold will undoubtedly prove perhaps the best asset class of all, particularly as the East begins to dominate global trade and finance as it surely will. Other assets will wax and wane but gold, which has stood the test of time through all kinds of political and financial upheavals over hundreds of years, will likely continue to do so in the years ahead.

Yes, one of these days the gold price will be allowed to rise to something resembling a fair market supply vs. demand price, but as Lawrie is more than aware, it will only happen with the blessing of JPMorgan et al.---and the rest of short sellers of last resort in the paper precious metal market.  This commentary was posted on the mineweb.com Internet site yesterday.

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Koos Jansen: Shanghai Gold Exchange Withdrawals Equal Chinese Gold Demand, Part 3

Gold researcher and GATA consultant Koos Jansen tonight provides his most detailed review yet of China's gold demand and explains why he thinks it is not as much as recently estimated by GoldMoney research director Alasdair Macleod.

Jansen's commentary is headlined Shanghai Gold Exchange Withdrawals Equal Chinese Gold Demand, Part 3, and it's posted at his Internet site, ingoldwetrust.ch.  And the GATA releases just keep on coming---and I thank Chris Powell for wordsmithing the paragraph of introduction.

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Hardly a Mention of Central Banks in Financial Times Report on London Gold Fix

The fix remains the global gold benchmark, used by miners, central banks, jewellers and the financial industry to trade gold bars, value stocks and price derivative contracts. The original five bullion dealers have been replaced by five banks: HSBC, Deutsche Bank, Scotiabank, Barclays, and Société Générale. But the process and traditions are little changed; had Rothschild not sold its fixing seat in 2004, the members might still be meeting in its oak-panelled boardroom with small Union Jack flags on their desks, rather than via conference call.

To supporters of the gold fixing, its longevity is a mark of its efficiency and utility. To a growing group of critics, however, the benchmark is opaque, old fashioned and vulnerable to market abuse.

Pressure to reform is coming from several directions.

Since uncovering evidence of alleged abuse by bankers of the Libor and forex benchmarks, regulators have been scrutinising other big financial benchmarks for signs of weakness. The German watchdog BaFin has requested documents from Deutsche Bank, which has put its seat up for sale, as part of a precious metals market review. Academics have questioned the fix's fairness and suggested possible collusion. Smelling blood, US lawyers launched at least three class action suits in March alleging rigging. From being an asset of considerable prestige, a fixing seat may be turning into a liability.

This longish Financial Times story from Monday---which is long on drivel and short on substance---was posted in the clear on the gata.org Internet site yesterday---and it's not worth reading, at least in my opinion.

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Apr 15, 2014

Mortgage Lending Drops to 17-Year Low as Rates Curb Borrowing

U.S. mortgage lending is contracting to levels not seen since 1997 — the year Tiger Woods won his first of four Masters championships — as rising interest rates and home prices drive away borrowers.

Wells Fargo & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that’s part of an industry-wide dropoff. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association in Washington.

Lending has been tumbling since mid-2013 when mortgage rates jumped about a percentage point after the Federal Reserve said it might taper stimulus spending. A surge in all-cash purchases to more than 40% has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association.

This article showed up on the moneynews.com Internet site yesterday---and I thank West Virginia reader Elliot Simon for sending it along very late last night.

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Tensions over Money Flows Bode Poorly for Global Economy

For a bunch of people who just agreed the global economy is doing better, top officials from the world's rich and poor nations sound rather worried.

For poor nations, the easy monetary policies in advanced economies are leading to big swings in capital flows that could destabilize emerging markets. For rich countries, the hoarding of currency by developing nations is blocking progress toward a more stable global economy.

Those tensions, which have been brewing for years, seemed to be rising as finance ministers and central bank chiefs from the Group of 20 economies gathered last week in Washington, as evidenced by harsh words from Washington and Delhi.

Both rich and poor say they are acting in their own self interest, and what makes the conflict so intractable is that both have very rational arguments.

This Reuters piece, filed from Washington, was posted on their Internet site in the wee hours of Sunday morning EDT---and I thank reader "h c" for sharing it with us.

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Martin Hutchinson: The Ultimate in Foolish Leverage

The Financial Times revealed this week that trades in index credit default swap (CDS) options had managed to avoid being listed on exchanges, with all the transparency requirements that brings, instead being allowed to continue trading on an over-the-counter basis. The amount outstanding is relatively small in relation to the $25 trillion of CDS outstanding, but lack of transparency is likely to hide a deep underlying problem. I had thought that CDS themselves represented the ultimate in unmanageability by conventional risk management. But index CDS swaptions are worse, being even more leveraged and hence even more liable to excessively large tail risks that can crater the world's banking system.

Let's start with a little background, for those who never read our 2010 book, "Alchemists of Loss," or who have forgotten it. CDS were invented in the 1990s as a way to hedge/bet on credit risk. As an instrument, they have a number of problems, one of which (significant for these new gambling chips) being that there's really no good way to determine how much the thing will pay off in a bankruptcy. The CDS bankruptcy "auction" in which a few million dollars' worth of defaulted debt is put up for auction, to determine the price of instruments worth billions, is far too easily gameable. That's why, when swap market practitioners like myself had looked at the possibility of CDS in the 1980s, we had decided there was no practical way to create a sound product.

Well, dear reader, this short essay is a must read, but don't feel bad if you get a little lost as you progress through it.  If you don't completely understand why you should be terrified of credit default swaps and swaptions, just know that you should be. [That, and collateralized debt obligations [CDO], which he doesn't mention]  You'll be scared enough by the parts you do understand.  This commentary by Martin was posted on the Bear's Lair over at the prudentbear.com Internet site a week ago yesterday---and I thank reader U.D. for bringing it to our attention.

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Guardian and Washington Post Win Pulitzer Prize for NSA Revelations

The Guardian and The Washington Post have been awarded the highest accolade in US journalism, winning the Pulitzer prize for public service for their groundbreaking articles on the National Security Agency’s surveillance activities based on the leaks of Edward Snowden.

The award, announced in New York on Monday, comes 10 months after the Guardian published the first report based on the leaks from Snowden, revealing the agency’s bulk collection of U.S. citizens’ phone records.

In the series of articles that ensued, teams of journalists at The Guardian and The Washington Post published the most substantial disclosures of U.S. government secrets since the Pentagon Papers on the Vietnam war in 1971.

The Pulitzer committee praised The Guardian for its "revelation of widespread secret surveillance by the National Security Agency, helping through aggressive reporting to spark a debate about the relationship between the government and the public over issues of security and privacy".

This article showed up on The Guardian Web site early yesterday evening BST---and it's the first offering of the day from Roy Stephens.

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Europe's Top Banks Cut 80,000 More Staff in Post-Crisis Overhaul

Europe's largest banks cut their staff by another 3.5 percent last year and the prospect of a return to pre-crisis employment levels seems far off, despite the region's fledgling economic recovery.

Spurred into action by falling revenue, mounting losses and the need to convince regulators they are no longer "too big to fail", banks across the globe have shrunk radically since the 2008 collapse of U.S. bank Lehman Brothers sparked the financial crisis.

Last year, the tide of bad news began to turn for European banks, which are among the region's largest employers.

But despite the improved outlook, Europe's 30 largest banks by market value cut staff by 80,000 in 2013, calculations by Reuters based on their year-end statements showed.

This short Reuters essay, filed from London, was posted on their Web site on Sunday morning EDT---and it's the second offering of the day from reader "h c".

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Banking Union Dominates Final European Parliament Session This Week

Crucial laws for the EU's banking union will headline proceedings in Strasbourg this week as MEPs gather there for the parliament's final session before May's European elections.

On Tuesday (15 April) deputies will debate and then sign off on the three final pieces of banking legislation: pan-EU rules protecting the first €100,000 of individuals' savings; a directive on bank recovery which sets out the hierarchy of shareholders and bondholders who will suffer losses if private banks get into difficulties; and a law establishing a single resolution mechanism for banks.

The agreement establishes a single regime to wind-down banks alongside a common fund worth €55 billion paid by the banks themselves to cover the costs of resolution. The rules will apply to all banks in the eurozone, as well as to those in countries which sign up to them.

This story, filed from Brussels, was posted on the euobserver.com Internet site yesterday morning Europe time---and it's the second contribution of the day from Roy Stephens.  It's worth reading.

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Washington Drives the World to War — Paul Craig Roberts

The CIA director was sent to Kiev to launch a military suppression of the Russian separatists in the eastern and southern portions of Ukraine, former Russian territories for the most part that were foolishly attached to the Ukraine in the early years of Soviet rule. 

Washington’s plan to grab Ukraine overlooked that the Russian and Russian-speaking parts of Ukraine were not likely to go along with their insertion into the EU and NATO while submitting to the persecution of Russian speaking peoples.  Washington has lost Crimea, from which Washington intended to eject Russia from its Black Sea naval base. Instead of admitting that its plan for grabbing Ukraine has gone amiss, Washington is unable to admit a mistake and, therefore, is pushing the crisis to more dangerous levels.

If Ukraine dissolves into secession with the former Russian territories reverting to Russia, Washington will be embarrassed that the result of its coup in Kiev was to restore the Russian provinces of Ukraine to Russia.  To avoid this embarrassment, Washington is pushing the crisis toward war.

This essay by Paul was posted on his Web site yesterday---and is definitely worth reading, especially for all serious students of the New Great Game.  My thanks go out to Roy Stephens once again.

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Europe Has Subjected the Greek People to a Cruel Experiment

Greece’s triumphant sale of five-year bonds to hedge funds (1/3) and global in investors – half based in London – tells us a great deal about the mental and emotional state of investors.

It tells us very little about the state of the Greek economy or Greek society. It is certainly not evidence that Greece is safely out of the woods. It is even less a vindication of EU/IMF Troika policies, an epic failure that will be studied years hence by scholars.

Normally when a country emerges from the trauma of an IMF austerity regime it has at least a tolerable level of debt, and if need be a devalued currency to restore competitiveness. Tough reforms matched by condign relief. The country is put on a viable path towards recovery.

This has not happened in Greece. Public debt is still 178pc of GDP, despite a haircut of private creditors near 70pc in effective terms, and despite (or because of) serial EU-IMF loan packages – the “occupation loans” as they are known in Greece. This level remains untenable for a country without a sovereign central bank and currency.

This Ambrose Evans-Pritchard blog, which is worth reading as well, was posted on the telegraph.co.uk Internet site on Saturday---and once again I thank Roy Stephens for sending it our way.

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US Corn Exports to China Drop 85% After Ban on GMO Strains – Industry Report

China’s rejection of shipments of US corn containing traces of unapproved genetically modified maize has caused a significant drop in exports. According to a new report, US traders have lost $427 million in sales.

Overall, China has barred nearly 1.45 million tons of corn shipments since last year, the National Grain and Feed Association, an American industry association, said Friday.

The tally is based on data from export companies and is significantly higher than the previous numbers reported by the media, which said roughly 900,000 tons were affected. US corn exports to China since January are down 85 percent from the same period last year, the report says.

China has been blocking shipments of American corn from its market since November. This was caused by the presence of the MIR162 genetically modified corn strain in the shipments. It was developed by the company Syngenta and has not been approved by the Chinese government since an application was submitted in March 2010.

This article appeared on the Russia Today Web site during the Moscow lunch hour on Saturday---and I thank South African reader B.V. for finding it for us.

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Nine King World News Blogs/Audio Interviews

1. John Embry: "The End Game Will Be Disastrous For the U.S. and the West"  2. James Turk: "Comex Casino Lies---and Skyrocketing to New All-Time High"  3. Dr. Paul Craig Roberts: "Why This Collapse Will Be So Horrific"  4. Michael Pento: "The End Game For the United States Will Be Catastrophic"  5. John Ing: "China's Massive Gold Hoard---and Global Flight From the Dollar"  6. Robert Fitzwilson: "Alarming Secrets U.S. and Saudi Arabia Are Hiding From the World"  7. Richard Russell: "The Cheapest Thing on the Planet is Silver"  8.  The first audio interview is with Dr. Paul Craig Roberts---and the second audio interview is with Bill Fleckenstein

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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Goldman Stands by $1,050 Gold Target on Outlook for Recovery

Gold will resume a decline as U.S. economic growth accelerates, according to Goldman Sachs Group Inc., which reiterated a forecast for the metal to end the year at $1,050 an ounce.

Bullion’s rally this year was spurred by poor U.S. data probably linked to the weather and rising tension in Ukraine, analysts led by Jeffrey Currie wrote in a report, describing the reasons as transient. With the tapering of the Federal Reserve’s bond-buying program, U.S. economic releases will return as the driving force behind lower prices, he wrote.

Gold’s 12-year bull run ended in 2013 as the Fed prepared to reduce monthly bond-buying that fueled gains in asset prices while failing to stoke inflation. Prices rose 10 percent this year even as the Fed cut purchases, with Russia’s annexation of Crimea and mixed U.S. economic data boosting haven demand. Last year, Currie described gold as a “slam-dunk sell” for 2014.

Of course there's no way that gold will even get a sniff of that price, but the mainstream media will print any drivel without question that Wall Street hands them.  I found this Bloomberg story, which was filed from Singapore, posted on their Web site very early yesterday morning Denver time.  I borrowed it from the sharpspixley.com Internet site.

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Question Greenspan About Gold at the New Orleans Conference in October

The greatest failure of financial journalism and investment fund management long has been the failure to put specific questions to central banks about their surreptitious interventions in the markets, their market rigging. But participants at this October's New Orleans Investment Conference may have an opportunity to start correcting that failure.

Astounding as it seems, former Federal Reserve Chairman Alan Greenspan has agreed to speak at the conference and to take questions from the audience, including questions about gold.

Of course there is no guarantee that Greenspan will answer the questions, or answer them honestly, rather than claim some obligation to protect the secrecy of Federal Reserve operations or deflect questions to the U.S. Treasury Department, whose Exchange Stabilization Fund is explicitly authorized by federal law to trade secretly not only in gold but also in any foreign currencies and "other instruments of credit and securities"...

This commentary by GATA secretary/treasurer Chris Powell was posted on the the gata.org Internet site yesterday.

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Bart Chilton Joins America's Largest Law Firm as Policy Advisor

It seems like it was only yesterday (actually it was early November) when infamous CFTC commissioner, legendary threat to gold manipulators nowhere, and Alexander Godunov impersonator Bart Chilton made a very dramatic exit stage left.

Here is what we said at the time:  Having "left traders in their own" during the shutdown, Chilton expressed "excitement" at his new endeavours after sending his resignation letter to President Obama this morning (more poetry? - or body doubles?) "I'm reminded of the old Etta James song, 'At Last,'" said Mr. Chilton, one of the agency's three Democratic members. "At last, we've got this rule here," and at last, he would be leaving the CFTC. This leaves us wondering whether Chilton, no longer burdened by the shackles of his meagre compensation, perhaps can finally do what he has been promising to do for years - become a whistleblower - after all he has insinuated so many times he knows where all the "dirt" is; unless, of course, it was all for show.

The rhetorical answer to the rhetorical question: of course it was all for show, confirmed moments ago when Chilton became just the latest "regulator" to take the great revolving door out of a worthless public service Washington office into a just as worthless, but much better paying private-sector Washington office. Presenting the latest employee of DLA Piper, the largest law firm in the US, and possibly the world, by number of partners - Bart Chilton, poet.

This should come as no surprise to anyone, as it certainly didn't for me.  This news item showed up on the Zero Hedge Web site late yesterday evening EDT---and I thank Elliot Simon for sending it to me just after midnight.

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New York Fed Contradicts Its Former Vice President About Gold Accounts

The Federal Reserve Bank of New York has contradicted the assertion of its former vice president that it has provided gold accounts to bullion banks.

The assertion of such accounts was made by H. David Willey, the former New York Fed vice president in charge of foreign central bank accounts and the gold vault at the New York Fed, in a speech given in May 2004 to the American Institute for Economic Reserve in Great Barrington, Massachusetts.

Willey said: "The Federal Reserve Bank of New York provides limited facilities for gold transactions. The bank will allow gold accounts only for foreign monetary authorities and for banks that are members of the Federal Reserve System, not for other gold dealers in the U.S. markets."

I found this commentary by Chris Powell posted on the gata.org Web site yesterday.

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Anglo American "Mulls Sale of South African Platinum Mines"

Anglo American's chief executive has hinted that the mining titan is looking to offload its strike-hit South African platinum mines to concentrate on open-cast extraction.

The London-listed firm's operations in South Africa's platinum belt north of Johannesburg have been idle for close to three months, forcing the firm to dig into reserves and hitting its bottom line.

About 80,000 miners are on strike and have vowed not to return to the shafts until their minimum monthly wage is doubled to 12,500 rand, around $1,200.

Anglo American says that demand, if met, would wreck its platinum subsidiary.

This AFP story, was posted on the france24.com Internet site yesterday morning---and I thank reader B.V. for his final contribution to today's column.

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Gold scarce, India's Silver Jewellery Exports Double

A shortage of gold as a raw material and the consequent decline in gold jewellery exports appears to have opened up new avenues of growth for silver jewellery in India.

India's silver jewellery exports rose 45.33% to $84.1 million in February 2014, and jumped 89% in the 11-month period to $1.35 billion, according to data from the Gems and Jewellery Export Promotion Council.

Council data also showed that silver jewellery exports rose 109% between April 2013 and February 2014, to $1.3 billion (Rs 81.4 billion) from $642 million (Rs 38.85 billion) in the same period of the previous financial year.

Pankaj Parekh, vice chairman of the Council said it was not just silver jewellery that shone in the overseas market, but rather exports of silver utensils, artifacts and other silver articles too continued with their upward trend to the US, parts of Europe and Japan.

This silver-related news item, filed from Mumbai, showed up on the mineweb.com Internet site yesterday---and it's a must read of course.

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Economists Notwithstanding, Indians Know How to Put Their Gold to Work

It's indestructible. It's fungible. It's beautiful. And for Indians, gold -- whether it's 18, 22, or 24-carat -- is semi-sacred.

The late distinguished Indian economist I.G. Patel observed, "In prosperity as in the hour of need, the thoughts of most Indians turn to gold."

No marriage takes place without gold ornaments presented to the bride. Even the poorest Indian outfits girls in the family with a simple nose ring of gold.

The India of old was known as "sone ki chidiya" or "golden sparrow," so opulent were the jewels of its rulers from the Moghul dynasty to the princely states.

For Indian women who were not formally educated, gifting them gold was their social security. Today, whether Hindu, Christian, Buddhist, or Muslim, bedecking the bride in gold invests her with good fortune, according to anthropologist Nilika Mehrotra.

This story, posted on the npr.org Internet site in the wee hours of yesterday morning, was something I found posted on the gata.org Internet site yesterday as well.  Its real headline reads "A Gold Obsession Pays Dividends For Indian Women".  Needless to say, it's worth reading.

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Koos Jansen: Shanghai Withdrawals Falling but Still Above Last Year's

Weekly withdrawals from the Shanghai Gold Exchange have been declining for five weeks but remain above withdrawals for the same period last year, gold researcher and GATA consultant Koos Jansen reports at the Swiss Internet site ingoldwetrust.ch.

This is another gold-related news item I found on the gata.org Internet site yesterday.

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Grant Williams: All Markets Are Rigged, Maybe Gold Most of All

All markets are rigged these days, perhaps the gold market most of all, fund manager Grant Williams writes in the new edition of his Things That Make You Go Hmmm... newsletter.

Williams writes: "In order for market rigging to be stopped, the changes have to come from those entrusted with regulation, in the form of stern punishments for those caught rigging them, and there must be changes to the rules to close the loopholes that allowed this kind of activity to occur in the first place.

"Instead, the bodies which supposedly oversee the markets are involved in the most serious rigging of all.

Grant's gold commentary isn't very long---and there isn't anything in it that you haven't see already in this column---but it, along with the rest of the column [which is a big read], is definitely worth your time.  I thank Chris Powell for wordsmithing the above two paragraphs of introduction.

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